Saudi purge casts doubt over plans for Saudi Aramco IPO

Last weekend’s spate of arrests orchestrated by Saudi Arabia’s Crown Prince Mohammed bin Salman that has seen several members of the royal family confined to luxury hotel accommodation appears to have dampened the investment community’s enthusiasm for the KSA’s plans to sell off a stake in the state-owned Saudi Aramco oil company. Analysts are now trying to work out if the purge was a sign of the Crown Prince’s strength and determination to reform or an attempt to centralise power in the face of potentially more turmoil to come. While the Prince has firmly pinned his colours to the mast so-called Vision 2030 drive that seeks to combine economic reform with modest social liberalization, there is a perception that the Saudi government has let itself be distracted by the blockade of Qatar and the long-running war in Yemen. Now, the abrupt internal purge that has ousted economic technocrats, billionaire Prince Alwaleed bin Talal and other members of the royal familyhas left experts wondering whether it is a genuine attempt to weed out aimed at corruption or pre-emptive strike to neutralise the Crown Prince’s political rivals. The future of the Aramco IPO was further put in doubt by reports in Reuter earlier this month that the Chinese state-owned oil companies PetroChina and Sinopec had written to Saudi Aramco to express an interest in making an outright purchase of the 5% stake. It is also being reported that well before this weekend’s events a debate was taking place in the Royal Court that, with oil prices a relatively low levels, many feel that a $2 trillion valuation is overly ambitious and a more sensible tack would be to hold fire – or find another option.